1. What is accounting? Discuss the scope and functions of accounting.

2. Explain various Accounting concepts.

3. What are the contents of a standard Balance sheet? With the help of a suitable
example, explain how a balance sheet is constructed.
4. What is inventory? Explain the methods of inventory valuation.
5. What are the components of total cost? Discuss the categories in which cost can
be classified.
6. Differentiate between absorption costing and marginal costing. Elaborate the
utility and limitations of marginal costing.
7. What do you understand by financial management? Explain three main
decisions related to finance functions which a firm must take.
8. List the fundamental accounting ratios. How do they respond to the needs of
control by management?
9. Differentiate between the concepts of Gross Working Capital and Net Working
Capital. Which one do you think would be more crucial in tourism operations
and why?
10. What are the features of an appropriate capital structure? Explain the
determinates of capital structure.
 1. What is accounting? Discuss the scope and functions of accounting.

Accounting is often called the language of business. The basic function of any language
is to serve as a means of communication. The purpose of accounting is to communicate
or report the results of business operations and its various aspects. Though accounting
has been defined in various ways; According to one commonly accepted definition
“Accounting is the art or recording, classifying and summarizing in a significant
manner and in terms of money, transaction and events which are; in part at least, of
financial character and interpreting the results thereof.” Another definition which is less
restrictive interprets accounting as “The process of identifying, measuring and
communicating economic information to permit informed judgements and decisions by
the users of information.”

The scope of accounting can be presented in a diagrammatic form as shown below:

Data creation and collection

It is the area which provides raw material for accounting. The data collected is historic
in the sense that it refers to events which have already taken place. Earlier, accounting
was largely concerned with what had happened, rather than making any attempt to
predict and prepare for future.

After the historic data has been collected, it is recorded in accordance with generally
accepted accounting theory. A large number of transactions or events have to be
entered in the books of original entry (journals) and ledgers in accordance with the
classification scheme already decided upon. The recording and processing of
information usually accounts for a substantial part of total accounting work. This type
of activity of accounting may be called recordative. The processing method employed
for recording may be manual, mechanical or electronic. Computers are also used widely
in modern business for doing this job.

Data evaluation

It is regarded as the most important activity in accounting these days. Evaluation of

data includes controlling the activities of business with the help of busgets and
standard costs (budgetary control), evaluating the performance of business, analyzing
the flow of funds, and analyzing the accounting information for decision-making
purposes by choosing among alternative courses of action.

Analytical and interpretative

The analytical and interpretative work of counting may be for internal or external uses
and may range from snap answers to elaborate reports produced by extensive research.
Capital project analysis, financial forecasts, budgetary projections and analysis for
reorganization, takeover or merger often lead to research-based reports.

Data evaluation has another dimension and this can be known as the auditive work
which focuses on verification of transaction as entered in the books of account and
authentication of financial statements. This work is done by public professional
accountants. However, it has become common these days for even medium-sized
organisations to engage internal auditors to keep a continuous watch over financial
flows and review the operation of the financial system.

Data reporting

It consists of two parts-external and internal. External reporting refers to the

communication of financial information (viz., earnings, financial and funds position)
about the business to outside parties, e.g., shareholders, government agencies and
regulatory bodies of the government. Internal reporting is concerned with the
communication of results of financial analysis and evaluation to management for
decision-making purposes.

Functions of accounting are related to those statements which provide information of

economic entity mainly measurable regarding money that will be used in deciding for
the future plan of action from various alternatives.

The general functions of Accounting are identification, recording, classification,

summarization of transactions, ascertainment of results, exhibition of the financial
position of an organization, communication of necessary information derived from an
interpretation and analysis of the interested parties including the management.

In brief we can say that, accounting functions as the record keeper of any financial
information of past, present and the future timing in a managed way.

The Managerial functions of accounting are listed below:

a. Control of financial policy and formation of planning

Various financial information is presented before the management so that the
management can control financial policies and formulates panning regarding
future activities and course of action.
b. Preparation of budget
The preparation of estimated statements of income and expenditure on the basis
of future activities is also one of the important managerial functions.
 Accounting provides the necessary financial information required for the
preparation of this budget. Later on executed activities are compared with
budgetary elements.
c. Cost control
A standard cost is estimated ahead of each cost. For this purpose, the necessary
financial information is available from accounting records.
Actual cost and standard cost are compared for evaluating the efficiency of work.
In this way cost control is possible.
d. Evaluation of employees’ performance
Assigned tasks of employees of every, department of an organization are to be
evaluated. For this, Accounting provides the necessary information.
e. Prevention of errors and frauds
Through the accounting system, the activities of employees are checked to
prevent errors and fraud.